Transport Fuel Demand Growth Rebounds in 2019

Next year, global demand for transport fuels will rise by nearly 1.1 million b/d, after increasing by just 800,000 b/d in 2018. This acceleration will be driven by rebounding gasoline and diesel demand growth.

Gasoline demand, which is slated to increase by just 150,000 b/d this year, is expected to rise by 350,000 b/d. The turnaround in the gasoline market will be particularly pronounced in China and Brazil.

Meanwhile, diesel demand growth is forecast to rise to 470,000 b/d in 2019 from 330,000 b/d in 2018 as consumption in China and Saudi Arabia plateaus after collapsing this year.

In spite of rebounding global gasoline demand growth, increases in output, particularly East of Suez, will far outstrip demand gains. This loosening of fundamentals will exert bearish pressure on gasoline

fundamentals and further narrow gasoline spreads to crude in 2019.

Similarly, in spite of accelerating demand growth, the global diesel market will weaken prior to the implementation of the IMO’s 0.5 percent sulfur content cap on marine fuels. As a result, and global

trade flows of diesel will shift.

Refining capacity increases will help the Middle East raise diesel exports to Europe from 350,000 b/d in 2018 to 450,000 b/d in 2019, while U.S. and Asian exporters will trim their deliveries to Europe. With

Europe’s import requirement shrinking, Middle East barrels will add downward pressure on global distillate spreads to crude, particularly in the first half of 2019.